SOUTH KESTEVEN DISTRICT COUNCILmoderngov.southkesteven.gov.uk/documents/s20630/Internal Audit … · Right to Buy Final 0 3 1 Corporate Governance Final 0 1 1 Page 4 of 34. South

SOUTH KESTEVEN DISTRICT COUNCIL Internal Audit Progress Report Governance and Audit Committee

21 June 2018 This report is solely for the use of the persons to whom it is addressed. To the fullest extent permitted by law, RSM Risk Assurance Services LLP will accept no responsibility or liability in respect of this report to any other party.

Page 1 of 34

South Kesteven District Council Internal Audit Progress Report

CONTENTS 1 Introduction ................................................................................................................................................................... 3 2 Reports considered at this Governance and Audit Committee .................................................................................... 4 3 Looking ahead .............................................................................................................................................................. 7 4 Other matters ............................................................................................................................................................... 8 Appendix A: Internal audit assignments completed to date .............................................................................................. 9 For further information contact ........................................................................................................................................ 10

Page 2 of 34


1 INTRODUCTION The internal audit plan 2017/18 was approved by Governance and Audit Committee on 21 March 2017 and included a total of 20 planned reviews.

This report provides a summary update on progress against that plan and summarises the results of our work to date. Please see chart below for progress against the plan.

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1

Assignments Complete Assignments in Progress Assignments Not Yet Due

Page 3 of 34


2 REPORTS CONSIDERED AT THIS GOVERNANCE AND AUDIT COMMITTEE

This table informs of the audit assignments that have been completed and the impact of those findings since the last Governance and Audit Committee. Below provides a summary update on progress against the plan and summarises the results of our work completed since the last Governance and Audit Committee. The Executive Summary and Key Findings of the assignments below are attached to this progress report.

Assignment Status Opinion issued Actions agreed

H M L

Health and Safety Final

0 4 4

Right to Buy Final

0 3 1

Corporate Governance Final

0 1 1

Page 4 of 34


2.1 Impact of findings to date

Health and Safety Conclusion: Reasonable Assurance

Impact on Annual Opinion: Positive

As a result of testing undertaken, four medium and four low priority findings were identified. Management actions were agreed in respect of all findings.

The medium priority findings related to:

• For a sample of 10 contractors for each department (Property and Development, Facilities, Disabled Facilities Grants and Responsive Housing Repairs) testing identified three cases (one Property and Development and two Facilities) where the Competency Evaluation Record was not found on file. In all 10 cases (Property and Development) the evaluation was simply ticked with little or no comments to support the evaluation. For the 10 Facilities sample it was noted that in three cases we were provided with no evidence to confirm that a risk assessment had been carried out.

• A register of approved contractors is in place on the Council's old intranet. On testing we noted that the Register is not maintained up to date and is also not easily accessible to the staff. There is also no one member of staff (like the Health and Safety Compliance and Training Officer) assigned responsibility for monitoring the register to ensure that it is maintained up to date by the departments.

• On testing the monitoring of contractors, we noted that for the sample of 10 for each department (Property and Development, Facilities, Disabled Facilities Grants and Responsive Housing Repairs), in three cases (Property and Development) and in six cases (Responsive Housing Repairs) no evidence was found on file to confirm that the monitoring of the contractors Health and Safety arrangements had taken place i.e. contractor meetings.

• For a sample of 10 for each department (Property and Development, Facilities, Disabled Facilities Grants and Responsive Housing Repairs) testing identified four cases for Property and Development and four cases for Responsive Housing Repairs where information on asbestos at the property was not made available to the contractor.

Page 5 of 34


Right to Buy Conclusion: Reasonable Assurance


As a result of testing undertaken, three medium and one low priority findings were identified. Management actions were agreed in respect of all findings.

The medium priority findings related to:

• The Council has not produced its own Policy for the operation and administration of the RTB scheme. Instead it has opted to implement the legislation without imposing any restrictions on the types of properties that can be sold. The legislation states that a tenant does not have the RTB if your home is particularly suitable for occupation by elderly persons taking into account its location, size, design, heating system and other features. The Council does not have a policy that defines those properties that are particularly suitable for occupation by elderly persons and which would therefore be excluded from the Right to Buy. The result is that no properties are excluded from the Right to Buy.

• We could not find any documentary evidence to confirm that a current Energy Performance Certificate (EPC) was obtained and was provided to the purchaser of the property. It is a legal requirement to provide an EPC whenever a property is built, sold or rented.

• We noted that there are no checks carried out to identify if the property sold had been built using either grant funding, provided by Homes & Communities Agency or from Section 106 monies, provided by a developer securing planning permission, to meet a defined social housing need. Funding from these sources must be identified and recycled and utilised i.e. to part finance new social housing construction; therefore, these funds must be identified and posted into a recycled capital grants account and not included in the HRA capital receipts 'pool'.

Corporate Governance Conclusion: Substantial Assurance


As a result of testing undertaken, one medium and one low priority findings were identified. Management actions were agreed in respect of both findings.

The medium priority finding related to:

• Testing identified that the Council is not adequately complying with the Transparency Code 2015 under which the Government requires local authorities to publish certain data sets to make them available to public scrutiny. Such data sets include details of purchases over £500, social housing assets and senior salaries. Testing of a sample of 12 data sets identified that only six were published on the Council's website as required.

Page 6 of 34


3 LOOKING AHEAD All audits have been delivered for the year 2017/18.

Page 7 of 34


4 OTHER MATTERS 4.1 Changes to the audit plan Following discussion with management it has been agreed to remove the four continuous assurance reviews from the Internal Audit plan and allocate the days to contingency.

At the request of management, four advisory reviews were included in the audit plan for 2017/18 and these were: Housing Benefits Overpayments, Complaints and Freedom of Information, General Data Protection Regulations and Purchasing Cards. The final reports have been issued to management for these advisory reviews.

A review of Refuse Collection: Missed Bins was completed and the results of the review were presented at the previous committee meeting.

Recruitment and Retention, Homelessness and IT Software Development Lifecycle audits were deferred at the request of management. Recruitment and Retention was deferred due to the implementation of a new Payroll and HR System which will be introduced into the organisation by July 2018. Further, one of the team of two officers who are responsible for recruitment and selection is on maternity leave and the other is heavily involved in the transfer of the old Payroll and HR system to the new. Homelessness was deferred as the existing service provision is undergoing change with the introduction of the Homelessness Reduction Act 2017. A later review will allow management to evaluate its systems and processes in line with the Act.

IT – Software Development Lifecycle has been removed from the plan due to this now being managed by IT as opposed to a Project Team.

Since the previous Governance and Audit Committee meeting, management requested two additional reviews: Right to Buy and a Contractor advisory review. The Right to Buy report is being presented at this committee meeting. The results of the Contractor advisory review have been shared with management.

4.2 Quality Assurance and Continual Improvement To ensure that RSM remains compliant with the PSIAS framework we have a dedicated internal Quality Assurance Team who undertake a programme of reviews to ensure the quality of our audit assignments. This is applicable to all Heads of Internal Audit, where a sample of their clients will be reviewed. Any findings from these reviews being used to inform the training needs of our audit teams.

The Quality Assurance Team is made up of: Ross Wood (Manager, Quality Assurance Department) with support from other team members across the department. All reports are reviewed by James Farmbrough as the Head of the Quality Assurance Department.

This is in addition to any feedback we receive from our post assignment surveys, client feedback, appraisal processes and training needs assessments.

Page 8 of 34


APPENDIX A: INTERNAL AUDIT ASSIGNMENTS COMPLETED TO DATE Report previously seen by the Governance and Risk Committee and included for information purposes only:

Assignment Status Opinion issued Actions agreed

H M L

Asset Management Plan (HRA) Final

0 2 1

Follow Up 1 Final Reasonable progress 0 0 2

Business Continuity Final

0 4 1

Cyber Security Final

0 4 5

Housing Benefit Final

0 2 1

Payroll and Expenses Final

0 2 0

Risk Management Final

0 1 1

Follow Up 2

Final Good Progress 0 1 0

Refuse Collection: Missed Bins Final

0 0 0

Follow Up 3 Final Good Progress 0 0 3

Page 9 of 34


FOR FURTHER INFORMATION CONTACT Chris Williams, Head of Internal Audit

[email protected]

Tel: 07753 584 993

rsmuk.com

As a practising member firm of the Institute of Chartered Accountants in England and Wales (ICAEW), we are subject to its ethical and other professional requirements which are detailed at http://www.icaew.com/en/members/regulations-standards-and-guidance. The matters raised in this report are only those which came to our attention during the course of our review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Actions for improvements should be assessed by you for their full impact. This report, or our work, should not be taken as a substitute for management’s responsibilities for the application of sound commercial practices. We emphasise that the responsibility for a sound system of internal controls rests with management and our work should not be relied upon to identify all strengths and weaknesses that may exist. Neither should our work be relied upon to identify all circumstances of fraud and irregularity should there be any. Our report is prepared solely for the confidential use of South Kesteven District Council, and solely for the purposes set out herein. This report should not therefore be regarded as suitable to be used or relied on by any other party wishing to acquire any rights from RSM Risk Assurance Services LLP for any purpose or in any context. Any third party which obtains access to this report or a copy and chooses to rely on it (or any part of it) will do so at its own risk. To the fullest extent permitted by law, RSM Risk Assurance Services LLP will accept no responsibility or liability in respect of this report to any other party and shall not be liable for any loss, damage or expense of whatsoever nature which is caused by any person’s reliance on representations in this report. This report is released to you on the basis that it shall not be copied, referred to or disclosed, in whole or in part (save as otherwise permitted by agreed written terms), without our prior written consent. We have no responsibility to update this report for events and circumstances occurring after the date of this report. RSM Risk Assurance Services LLP is a limited liability partnership registered in England and Wales no. OC389499 at 6th floor, 25 Farringdon Street, London EC4A 4AB.

Page 10 of 34

South Kesteven District Council Health & Safety

1.1 Background An audit of Health and Safety has been undertaken as part of the approved internal audit periodic plan for 2017/18. The focus of this audit has been on third party contractors used by Property and Development, Responsive Housing Repairs, Facilities, Disabled Facilities Grants, Leisure and Amenities, Commercial Property and Gas.

The Council has arrangements in place for ensuring that contractors used by the Council have and maintain satisfactory standards in relation to health and safety. Failure by the Council to ensure this could result in liability falling on the Council as an organisation.

The arrangements include determining competency of contractors prior to being offered and commencing work. This is done by carrying out a Health and Safety Competency Assessment of Contractors for all high risk and medium risk contracted activities; all construction, improvement, building services, facilities management and like contractors. A Health and Safety Contractor Checklist is used for low risk contractors who are primarily inward facing, and office based and for contractors who carry out activities which supplement the work of existing staff and are protected by Council’s risk assessments.

Periodic monitoring of the contractor is required to be undertaken by the departments to ensure that the standards expected in respect of Health and Safety are being adhered to.

1.2 Conclusion Audit work established that a framework is in place for Health and Safety third party contractors, however, weaknesses were identified. We have raised four ‘medium’ and four ‘low’ priority findings across the departments reviewed. The ‘medium’ category findings are regarding:

1) The Competency Evaluation record was not always completed and where completed was not fully completed with comments as to why the contractor had passed or failed each section;

2) The register of approved contractors is not maintained up to date and is not easily accessible to the staff;

3) Monitoring of contractors could not always be evidenced; and

4) Information on asbestos in a property was not always communicated to the contractors.

Internal audit opinion: Taking account of the issues identified, the Board can take reasonable assurance that the controls upon which the organisation relies to manage this risk are suitably designed, consistently applied and effective. However, we have identified issues that, if not addressed, increase the likelihood of the risk materialising.

HEALTH AND SAFETY - EXECUTIVE SUMMARY

Page 11 of 34


1.3 Key findings The key findings from this review are as follows:

A Health and Safety Policy is in place. The Policy is dated 2015. The Health and Safety Policy is published to the staff on the Council’s intranet.

Contractors' Health and Safety Policies are reviewed as part of the Contractor Evaluations. At the time of procurement, the prospective contractor is required to complete a Contractor Questionnaire. There are three parts to the questionnaire – part one is regarding expected Health and Safety standards, part two relates to specific Health and Safety and part three is on specific construction. Contractors Health and Safety Policy, procedures and risk assessments and method statements, where applicable, are submitted by the contractor with the questionnaire.

Guidance notes are in place to assist the prospective contractor in completing the questionnaire. A Health and Safety competency of contractors is then undertaken by the procuring manager and the results are recorded on the Contractor Questionnaire Evaluation Record Sheet.

The commercial property is let by the Council on a full repairing basis. The leasee is responsible for Health and Safety at the property and is responsible for undertaking any required checks. An external contractor manages the commercial properties for the Council. Testing established that the contractor undertakes six monthly inspections of the commercial properties and from mid-2017 they also provide a copy of the inspection report and actions undertaken, like writing to the lessee regarding any issues identified at the inspection to the Council.

As part of the testing of each area – Property and Development, Responsive Housing Repairs, Facilities, Disabled Facilities Grants, Leisure and Amenities, Commercial Property and Gas – we enquired / reviewed the file to ensure that the staff we spoke to were aware of the data protection requirements and through testing established if the information was passed onto the contractors. No issues were identified.

Through testing and enquiry with Council Officers it was confirmed that information regarding difficult tenants etc, is passed on to contractors where it is applicable. When the property details are accessed on the system, a flag appears with the details.

However, the four ‘medium’ category findings are in relation to:

For a sample of 10 contractors for each department (Property and Development, Facilities, Disabled Facilities Grants and Responsive Housing Repairs) testing identified three cases (one Property and Development and two Facilities) where the Competency Evaluation Record was not found on file. In all 10 cases (Property and Development) the evaluation was simply ticked with little or no comments to support the evaluation. For the 10 Facilities sample it was noted that in three cases we were provided with no evidence to confirm that a risk assessment had been carried out.

A register of approved contractors is in place on the Council's old intranet. On testing we noted that the Register is not maintained up to date and is also not easily accessible to the staff. There is also no one member of staff (like the Health and Safety Compliance and Training Officer) assigned responsibility for monitoring the register to ensure that it is maintained up to date by the departments. Where up to date information is not maintained and also made available to the staff there is a risk of health and safety issues occurring, which may result in reputational damage.

On testing the monitoring of contractors, we noted that for the sample of 10 for each department (Property and Development, Facilities, Disabled Facilities Grants and Responsive Housing Repairs), in three cases (Property and Development) and in six cases (Responsive Housing Repairs) no evidence was found on file to confirm that the monitoring of the contractors Health and Safety arrangements had taken place i.e. contractor meetings. There is a risk that unsafe working practices may not be identified, if there are any, resulting in financial loss and reputational damage to the Council.

Page 12 of 34


For a sample of 10 for each department (Property and Development, Facilities, Disabled Facilities Grants and Responsive Housing Repairs) testing identified four cases for Property and Development and four cases for Responsive Housing Repairs where information on asbestos at the property was not made available to the contractor. There is an increased risk of Health and Safety issues occurring where information on asbestos is not made available to the contractors.

1.4 Additional information to support our conclusion The following table highlights the number and categories of management actions made. The detailed findings section lists the specific actions agreed with management to implement.

* Shows the number of controls not adequately designed or not complied with. The number in brackets represents the total number of controls

reviewed in this area.

Risk Control design not effective*

Non- Compliance

with controls*

Agreed management actions

Low Medium High

Robust health and safety procedures are not in place in place across the Council for third party contractors.

0 (12) 8 (12) 4 4 0

Total

4 4 0

Page 13 of 34

South Kesteven District Council Health and Safety 16.17/18

2 DETAILED FINDINGS

Categorisation of internal audit findings

Priority Definition

Low There is scope for enhancing control or improving efficiency and quality.

Medium Timely management attention is necessary. This is an internal control risk management issue that could lead to: Financial losses which could affect the effective function of a department, loss of controls or process being audited or possible regulatory scrutiny/reputational damage, negative publicity in local or regional media.

High Immediate management attention is necessary. This is a serious internal control or risk management issue that may lead to: Substantial losses, violation of corporate strategies, policies or values, regulatory scrutiny, reputational damage, negative publicity in national or international media or adverse regulatory impact, such as loss of operating licences or material fines.

This report has been prepared by exception. Therefore, we have included in this section, only those risks of weakness in control or examples of lapses in control identified from our testing and not the outcome of all internal audit testing undertaken.

Ref Control Adequate control design

Controls complied

with

Audit findings and implications Priority Action for management

Implementation date

Responsible owner

Risk: Robust health and safety procedures are not in place in place across the Council for third party contractors.

1 Council Health and Safety Policies and Procedures are in place and are communicated to all third parties. The Health and Safety Policy is dated 2015 and is published to the staff on the Council’s intranet.

Missing Control

The Council’s Health and Safety Policy is communicated to all third parties.

No - a) A Health and Safety Policy is in place. The Policy is dated 2015 and is signed by the Chief Executive and the Leader of the Council. An Annual Health and Safety report is made to the Governance and Audit Committee.

b) It was confirmed by Council staff that assessments of contractors are renewed every two years, however, it was identified that this requirement to renew every two years is not documented in the Policy.

Low The guidance on review of contractors will be reviewed and clarified to ensure that the review periods are relevant to the operational risks and contract duration.

31 July 2018 Service Manager Street Care Services (lead on Health and Safety)

Page 14 of 34



Controls complied

with


Implementation date

Responsible owner

2 Missing Control

The Council has Contract and Procurement Procedure rules in place. The rules were put into place in association with Procurement Lincolnshire in 2016. These procedure rules inform staff of the Council’s mandatory requirements. The document includes guidance on third party / contractor Health and Safety.

No - A review of the Contract and Procurement Procedure rules identified that guidance on third party / contractor Health and Safety is not included in the document.

There is a risk that staff may not become aware of the Council’s rules in respect of managing contractor / third party Health and Safety.

Low Guidance on third party / contractor Health and Safety will be included in the Contract and Procurement Procedure rules document.

29 June 2018 Health and Safety Compliance and Training Officer

3 At the time of procurement, the prospective contractor is required to complete a Contractor Questionnaire. There are three parts to the questionnaire – part one is regarding expected Health and Safety standards, part two relates specifically to Health and Safety and part three is on specific construction.

Contractors Health and Safety Policy, procedures, and risk assessments and method statements,

Yes No Property and Development

Testing of a sample of 10 contractors selected from the Council's Property and Development projects identified that:

a) In nine cases a corresponding Competency Evaluation record was on file.

b) In one case there was no evidence of a Competency Evaluation record.

c) In all cases it noted that no, or limited, evaluation comments are recorded on the competency assessments.

d) In all ten cases the contractors had provided Risk Assessment methodologies.

There is a risk that unsuitable contractors are used if their skills and competencies are not assessed and if evaluation comments are not recorded there

Medium Property and Development and Facilities

a) All contractors will be subject to assessment and evaluation prior to being used, including evaluating their Health and Safety Policies and qualifications held.

b) The Competency Evaluation process will be reviewed to ensure that evaluation content is thorough and proportionate to the scale of the contract and operational health and safety risks.

29 June 2018 Service Managers - Property and Development and Venues and Town Centre Management

Page 15 of 34



Controls complied

with


Implementation date

Responsible owner

where applicable, are submitted by the contractor with the questionnaire. Guidance notes are in place to assist the prospective contractor in completing the questionnaire.

A Health and Safety competency of contractors is then undertaken by the procuring manager and the results are recorded on the Contractor Questionnaire Evaluation Record Sheet.

is a lack of rationale and reasoning as to the assessment made.

Facilities

Testing of a sample of 10 contractors used by the Facilities Team identified:

a) In eight cases a Competency Evaluation record was on file however for the remaining two cases we were not able to establish if the Competency Evaluation record had been completed as none was provided to us for these two cases.

b) Risk Assessment methodologies were provided for six of the contractors and it was established that in one case the risk methodology was not required as the contractor was no longer used.

c) For the remaining three cases no evidence was provided to us to confirm that the risk assessment had been carried out.

There is a risk that unsuitable contractors are used if their skills and competencies are not assessed and if evaluation comments are not recorded there is a lack of rationale and reasoning as to the assessment made.

4 Up to date Health and Safety Policy and Procedures for contracted third party contractors is maintained on file by the Council. A reassessment of Health and Safety Competency of the contractors is then undertaken every two years.

Yes No Contractors' Health and Safety Policies are reviewed as part of the Contractor Evaluations.

Testing of 40 contractors across four departments (Property and Development, Disabled Facilities Grants, Facilities and Responsive Housing Repairs identified that:

a) For nine of the 10 contractors used by Property and Development the Contractor Evaluation had been carried out. However, it was noted that in one case there was no evidence on file to confirm

Low Property and Development, Facilities, Leisure and Amenities and Gas Safety

A reassessment of Health and Safety Competency of all the contractors providing services to the Council

29 June 2018 Service Managers - Property and Development; Venues and Town Centre Management; and Responsive Housing Repairs

Page 16 of 34



Controls complied

with


Implementation date

Responsible owner

that the Contractor Evaluation had been undertaken.

b) In all cases the contractors used by Disabled Facilities Grants contractors had been evaluated.

c) In all cases the contractors used by Responsive Housing Repairs had been evaluated.

d) In eight cases the contractors used by Facilities were evaluated. However, in two cases there was no evidence to confirm that the contractors had been evaluated.

For Leisure and Amenities and the Gas Contractor, testing established that a reassessment of Health and Safety Competency of the contractor was not undertaken every two years. On review of the file it was noted that Leisure and Amenities and the Gas Contractor are closely monitored in respect of health and safety and that health and safety is discussed at the monthly meetings.

If Health and Safety Policies are not evaluated there is a risk that contractors are used which have unsuitable, inappropriate or unsafe attitudes and working practices towards health and safety.

will be undertaken every two years.

5 The qualifications of the prospective contractors are subject to vetting as part of the procurement process. The contractors are required to provide evidence of their qualifications.

Yes No Contractors' qualifications are reviewed as part of the Contractor Evaluations.

Testing of 40 contractors across four departments (Property and Development, Disabled Facilities Grants, Facilities and Repairs) identified that:

a) Nine out of the 10 Property and Development contractors had been evaluated but there was no record for one.

Low Property and Development and Facilities.

The qualifications of the prospective contractors will be subject to vetting as part of the procurement process.

30 June 2018 Service Managers - Property and Development and Venues and Town Centre Management

Page 17 of 34



Controls complied

with


Implementation date

Responsible owner

b) For Disabled Facilities Grant all ten contractors had been evaluated.

c) For Responsive Housing Repairs contractors all ten contractors had been evaluated.

d) Eight out of the 10 Facilities contractors had been evaluated but there was no record for two.

If evidence of qualifications is not evaluated there is a risk that contractors are used who do not have the sufficient level of skill which could result in poor quality work and health and safety incidents which could lead to reputational damage and potential litigation against the Council.

6 Up to date Health and Safety assessments are in place for all contractors.

Yes No Testing of 10 Property and Development and 10 Disabled Facilities Grants contractors confirmed that assessments were performed prior to the job being undertaken.

For the Responsive Housing Repairs department, we were not able to identify specific jobs for the sample of contractors and as a result this test could not be undertaken on the Responsive Housing Repairs sample.

Testing of the Facilities Department confirmed that where assessments are in place these had been renewed.

A register of approved contractors is in place on the Council's intranet however, it was noted that this is not always kept up to date for instance, some contractors were identified as being on both the 'approved' and 'suspended' lists.

There is a risk that staff are using contractors based on incorrect information which could lead to inappropriate contractors being used, resulting in health and safety issues and reputational damage.

Medium a) The Health and Safety Compliance and Training Officer will be responsible for reminding staff to update the approved contractor list, making this available for staff to reference and will monitor compliance.

b) Contractors will not be used if an assessment has not been undertaken in the last two years, and a refresher assessment will be completed before the contractor is hired.

30 June 2018 Health and Safety Compliance and Training Officer

Service Managers - Property and Development; Venues and Town Centre Management; and Responsive Housing Repairs

Page 18 of 34



Controls complied

with


Implementation date

Responsible owner

7 Monitoring and reporting arrangements are in place to ensure that third party contractors are adhering to the Health and Safety arrangements and are reporting any Health and Safety issues.


For a sample of 10 there was no evidence on file to confirm the monitoring of three of the contractors.

If contractors are not monitored, or observations not recorded, there is a risk that unsafe working practices or inaccurate evaluations are not identified which could result in a health and safety incident.

Responsive Housing Repairs

There was no evidence of monitoring for six of the 10 contractors.

The monitoring form which is currently used to assess the Council's own operatives is undergoing a review process to see if it needs to be adapted before being put in to use to monitor contractors.

If contractors are not monitored, or observations not recorded, there is a risk that unsafe working practices or inaccurate evaluations are not identified which could result in a health and safety incident.

Medium Property and Development and Responsive Housing Repairs

We will monitor contractors to verify that they are following safe working practices and details of the observations made will be recorded and kept in the contractor's file.

29 June 2018 Service Managers - Property and Development and Responsive Housing Repairs

Page 19 of 34



Controls complied

with


Implementation date

Responsible owner

8 Information on asbestos is communicated to the contractor and on a timely basis. An Asbestos Register is maintained within the Property and Development Department.

Information on asbestos is made available to the contractor by email or via a link to a web-based tracker.


Testing of a sample of 10 contractors identified six instances where the contractors would need to be made aware of asbestos information based on the nature of the work. For five of the six cases asbestos information was provided to the contractor and in one case we noted that the information had not been provided.

There is a risk that if contractors are not aware of the location of asbestos that it may get disturbed which could lead to severe health and safety issues for the contractors and litigation and reputational damage against the Council.

Responsive Housing Repairs

Testing identified that in nine of the 10 instances the contractor would need to be made aware of any asbestos. The remaining contractor was a cleaner which would not involve any intrusive works. Asbestos information was provided to the contractor in five of the nine instances. There was no evidence to suggest that the information had been provided in the remaining four cases.

There is a risk that if contractors are not aware of the location of asbestos that it may get disturbed which could lead to severe health and safety issues for the contractors and litigation and reputational damage against the Council.

Medium Property and Development and Responsive Housing Repairs:

a) Information regarding the presence or absence of asbestos in a property will be communicated to contractors prior to any works being commenced unless it is clear that the work being undertaken will be non-intrusive as in two of the cases identified. Appropriate supporting notes will be made.

b) A record of the communication and the supporting documents will be kept on file.

29 June 2018 Service Managers - Property and Development and Responsive Housing Repairs

Page 20 of 34

South Kesteven District Council Right to Buy 19.17/18

1.1 Background At the request of management; we carried out an audit of the Council's policies and procedures for the processing of Right to Buy (RTB) applications received from eligible tenants.

Under the Right to Buy scheme eligible Council tenants can purchase their current home at a price lower than the full market value. The length of time spent as a tenant entitles them to a discount of up to £78,600 (at time of audit). The RTB is available to secure tenants of the Council who have held their tenancy for a minimum of three years. The initial discount of 35% of market value is for tenancies held for between three and five years. After five years as a secure tenant the discount available increases by 1% per year up to a maximum of 70%. The discount available is capped, in cash terms, at £78,600 regardless of the percentage discount that the tenant may be eligible for. Tenants currently living in flats can also participate in the RTB scheme. In most cases, they will purchase a long lease (125 years) and the discount arrangements are more generous than for a house. As a leaseholder there is an ongoing requirement to pay a ground rent and an annual service charge to the Council.

The procedures to be followed when administering a RTB application and the specific time limits within which each stage of the process must be completed are specified in the Right to Buy legislation. The Council's in-house legal team undertake the conveyancing and they ensure that the specific clauses regarding repayment of the discount, should the purchaser re-sell the property within a specified time limit, are included in the sales documentation and are registered as a charge against the property with the Land Registry.

The Council are aware of the potential risks arising from fraudulent RTB applications and the potential for money laundering especially when a cash purchaser is involved. Procedural guidance has been updated recently to ensure that staff are aware and carry out additional documented checks to mitigate these risks.

1.2 Conclusion Our audit testing identified that there is a high level of compliance with the detailed administrative procedures that are specified in the legislation and which must be followed. However, we did identify some policy and procedural weaknesses and, as a result, we have raised a total of three 'medium' priority and one 'low' priority management actions as a result of this audit.

Internal audit opinion: Taking account of the issues identified, the Council can take reasonable assurance that the controls in place to manage this risk are suitably designed and consistently applied. However, we have identified issues that need to be addressed in order to ensure that the control framework is effective in managing the identified risks.

Appendix D shows the different opinions and their definitions.

RIGHT TO BUY - EXECUTIVE SUMMARY

Page 21 of 34



The Council has appropriate procedural guidance notes and policy notes available to guide staff when processing RTB sales. These ensure that the eligibility requirements of the applicant and the availability for sale criteria for the property are being complied with. Staff also have access to the relevant legislation and to guidance notes published by central government;

A detailed scheme file of evidence has been produced containing all relevant documents relating to each RTB transaction and confirming that all eligibility requirements and due diligence have been carried out to ensure that the sale is progressed in accordance with the eligibility requirements;

A RTB checklist is produced for every sales transaction and is used to record all key processes, checks and actions involved in the sales process. This ensures that no individual checks are missed out;

The tenant seeking the Right to Buy has completed the necessary RTB1 notice of intention to claim the Right to Buy. It is completed in full, signed and dated by the applicants and is retained on file. The date of receipt by the Council is recorded;

After completing all the eligibility checks the Council issues a RTB2 Notice in reply to tenant’s application. The legislation requires the RTB2 to be issued within four weeks of receipt of the completed RTB1. Our testing confirmed that this target is met. This is the statutory notice that notifies the applicant that they are eligible to proceed with the Right to Buy. It outlines the next stage which is to obtain a valuation in order to determine the selling price;

An independent valuer is engaged to carry out an independent market valuation for the property. The valuation must be at the date that the application was made and not the current date. A Service Level Agreement is in place which clearly defines the scope of the valuation;

The discounts to be applied are calculated using the discount calculator available on the Gov.uk web-site and are based on the length of the tenancy, with 35% allowed for the first five years then 1% for each additional year. The discount is applied to the market valuation in order to arrive at the sales price. The discounts awarded are independently checked to ensure accurate calculation of the discount and to confirm that the discount does not exceed the maximum values defined in the RTB rules. Details of the offer price are communicated to the applicant in the Section 125 Offer notice;

As soon as the RTB524 Notice of Intention to proceed is received, solicitors are instructed to process the sale. Currently all property sales are processed in-house and the property file and all supporting documents is passed over to the Council's Legal Services department;

Legal completion of the sale is confirmed by the Completion Statement drawn up by Legal Services. Confirmation of exchange of contracts and legal completion, including receipt of the agreed sales price, is retained on file;

Written evidence is retained to confirm that the repayment of discount requirement has been secured and is written into the sales contract. Details of this covenant are included in the TP2 form and are registered with the Land Registry;

The Council ensures that any rent arrears are either cleared prior to date of completion of the sale, or that the arrears are added to the sales price, and are therefore included in the settlement sum paid by the purchaser;

The Council's Asset Register is updated promptly in order to reflect the disposal of the property and appropriate entries are made in the capital accounting system; and

The Council has an Anti-Money Laundering Policy and a Prevention of Right to Buy Fraud procedure in place.

Page 22 of 34


However, we identified the following control weaknesses and as a result we have raised three 'medium' and one 'low' priority management actions.

The Council has not produced its own Policy for the operation and administration of the RTB scheme. Instead it has opted to implement the legislation without imposing any restrictions on the types of properties that can be sold. The legislation states that a tenant does not have the RTB if your home is particularly suitable for occupation by elderly persons taking into account its location, size, design, heating system and other features. The Council does not have a policy that defines those properties that are particularly suitable for occupation by elderly persons and which would therefore be excluded from the Right to Buy. The result is that no properties are excluded from the Right to Buy;

Under the 'Housing' section of the Council's public web-site there is full details of the Right to Buy scheme and a brief outline of the procedures to follow if you think you are a qualifying tenant of the Council. There are also direct links to the official Government guidelines and information regarding the Right to Buy scheme. However, the Council has not produced any of its own guidance for tenants interested in making use of the Right to Buy scheme. We have noted that a number of neighbouring authorities including North Kesteven and City of Lincoln Councils both have information guides, in plain English, which aim to clearly set out the processes to follow, in a stage by stage description, available on their web-sites;

We could not find any documentary evidence to confirm that a current Energy Performance Certificate (EPC) was obtained and was provided to the purchaser of the property. It is a legal requirement to provide an EPC whenever a property is built, sold or rented; and

We noted that there are no checks carried out to identify if the property sold had been built using either grant funding, provided by Homes & Communities Agency or from Section 106 monies, provided by a developer securing planning permission, to meet a defined social housing need. Funding from these sources must be identified and recycled and utilised i.e. to part finance new social housing construction; therefore these funds must be identified and posted into a recycled capital grants account and not included in the HRA capital receipts 'pool'.


* Shows the number of controls not adequately designed or not complied with. The number in brackets represents the total number of controls

reviewed in this area.


Non Compliance with controls*

Agreed management actions

Low Medium High

Current political uncertainty results in sales transactions not complying with legislation and/or procedural guidance.

1 (26) 3 (26) 1 3 0

Total

1 3 0

Page 23 of 34


2 DETAILED FINDINGS

Categorisation of internal audit findings

Priority Definition






Controls complied with

Audit findings and implications Priority Action for management Implementation date

Responsible owner

Risk: Current political uncertainty results in sales transactions not complying with legislation and/or procedural guidance.

1 Tenants of the Council interested in using the Right to Buy scheme to purchase their existing home can find all relevant information and guidance from the Council's public website.

Yes No Under the 'Housing' section of the Council's public website, there is full details of the Right to Buy scheme and a brief outline of the procedures to follow if you think you are a qualifying tenant of the Council. There are also direct links to the official Government guidelines and information regarding the Right to Buy scheme.

However, the Council has not produced any of its own guidance for tenants interested in making use of the Right to Buy scheme. We have noted that a number of neighbouring authorities including North Kesteven and City of Lincoln Councils both have

Low We will explore the information documents produced by other local authorities and produce updated guidance notes that are specifically geared to explaining the process for buying your own council house and which can be downloaded as necessary direct from our web-site.

30 June 2018 Right to Buy Officer

Page 24 of 34





Responsible owner

information guides, in plain English, which aim to clearly set out the processes to follow, in a stage by stage description, available on their web-sites.

Unless the procedures are clearly explained, there is a risk that prospective purchasers are put off from proceeding because of the complex terminology used in the official government issued information packs.

2 Missing Control

The Council has appropriate procedural guidance notes and policy notes available to guide staff when processing RTB sales. These ensure that the eligibility requirements of the applicant and the availability for sale criteria, for the property, are being complied with. Staff also have access to the relevant legislation and to guidance notes published by DCLG.

No N/A Missing Control.

The Council has not produced its own Policy for the operation and administration of the Right to Buy scheme. Instead, it has opted to implement the legislation without imposing any restrictions on the types of properties that can be sold. What the law says: You do not have the Right to Buy if your home: is particularly suitable for occupation by elderly persons, taking into account its location, size, design, heating system and other features.

Because the Council has not produced its own policy which defines those properties that are particularly suitable for occupation by elderly persons and which would therefore be excluded from the Right to Buy, the result is that no properties are excluded from the Right to Buy.

Medium We will produce a 'SKDC Right to Buy' Policy which clearly sets out how we will implement the Government’s Right to Buy legislation and which clearly defines the Council's policy regarding the disposal of homes suitable for occupation by the elderly. This will include defining any restrictions that the Council may wish to implement that restrict the sale of these properties.

30 June 2018 Right to Buy Officer

Page 25 of 34





Responsible owner

This raises the risk that the Council is depleting its stock of properties particularly suitable for occupation by elderly persons, with the result that it potentially has insufficient housing stock available to meet its housing obligations to new elderly tenants or to allow tenants to downsize and transfer from a general needs family property into a property that is particularly suited to their needs as they grow older.

Similarly, homes that have received elderly or disable adaptations are not excluded from the Right to Buy. Again, this brings the risk of depleting the stock of properties adapted for the elderly to continue to live in and also results in the Council losing its investment in adapting properties if they can be sold to applicants with no specific need for the adaptation.

However, excluding properties that have elderly or disabled adaptations from the Right to Buy ensures that these properties remain available for re-letting in order to continue to meet the needs of future tenants.

We are aware of local authorities who have defined ''all bungalows'' and ''all properties with an elderly or disabled adaption'' as being ''particularly suitable for occupation be elderly persons”. A policy has been created that specifically excludes these properties from the 'Right to Buy' in

Page 26 of 34





Responsible owner

order to preserve the stock of rented accommodation that specifically meets the needs of elderly tenants.

3 Any future liability for service charges is identified and an estimate of the likely weekly charge is provided to the applicant. An Energy Performance Certificate is provided for every property sold.

Yes No We tested a sample of 20 completed RTB sales and confirmed that the initial eligibility checks carried out by Housing Management identifies if the property is self-contained or not and if there will be an on-going requirement to levy service charges on the property owner after the sale has been completed.

Our testing confirmed that for all properties sold there was evidence retained on file to confirm that the ongoing liability for service charges has been assessed. In the two sales where there is a confirmed on-going service charge liability we confirmed that the annual service charges have been assessed and are included in the legal completion pack.

From our testing of a sample of 20 completed RTB property sales we could not find any documentary evidence to confirm that a current Energy Performance Certificate (EPC) was obtained and was provided to the purchaser of the property. It is a legal requirement to provide an EPC whenever a property is built, sold or rented. When the lack of an EPC was discussed with staff, we were told that they are produced should they be requested, and that Legal Services had been told of the location of the

Medium We will ensure that a current Energy Performance Certificate is obtained for each Right to Buy property that is sold by the Council. The EPC will be obtained and included in the legal pack passed over to the purchaser’s legal representatives.

30 June 2018 Trainee Solicitor

Page 27 of 34





Responsible owner

database from where an existing EPC could be downloaded.

There is a risk that properties are being sold without the obligatory Energy Performance Certificate being provided to the purchaser.

4 Receipts from sales are retained by the Council in a ring-fenced account referred to as the 'HRA Capital Disposal Proceeds account'. Any grants including Section 106 monies received for the construction of the property is identified and this is journaled into a separate account so that it can be recycled and used to fund new HRA capital projects.

Yes No We tested a sample of 20 completed RTB property sales and confirmed that the Capital Receipt is received in Exchequer Services, identified and posted to Capital Receipts - Council Dwellings. The total income received is 'poolable' and as a result is coded to 999/T555. This is a restricted account within the Housing Revenue Account. All pooled income is repayable to the Government.

We noted that there are no checks carried out to identify if the property sold had been built using either grant funding, provided by Homes & Communities Agency or from Section 106 monies, provided by a developer securing planning permission to meet a defined social housing need. Funding from these sources must be recycled and utilised to part finance new social housing construction, therefore these funds must be identified and posted into a recycled capital grants account and not included on the 'pool'.

Only very recently built properties have the potential to have been built using either grant or s106 monies.

Medium We will ensure that a new check is introduced, covering recently built properties only, to identify the value of any grant or s106 monies used to finance their construction. This money will then be transferred from the disposal funds and placed in a recyclable grants account; where it can be utilised to help finance new provision of social housing.

30 June 2018 Financial Accountant

Page 28 of 34





Responsible owner

However, unless there is clear identification and segregation of these monies, there is the risk that these funds are inadvertently included in the HRA pool and therefore, are lost to Council and can no longer be recycled into new projects.

It was confirmed after the audit, that a check had been carried out and no properties that had been build using either grant or s106 monies have been sold under the Right to Buy scheme.

Page 29 of 34

South Kesteven District Council Corporate Governance 18.17/18

1.1 Background A review of Corporate Governance was undertaken at South Kesteven District Council as part of the approved internal audit periodic plan for 2017/18.

South Kesteven District Council has 56 councillors. Councillors are democratically accountable to the residents of their ward. The business of the Council is dealt with by Councillors meeting to democratically discuss and vote on decisions for the District. The Full Council meets six times a year.

The Cabinet is responsible for making the executive decisions. Meetings of the Cabinet are open to the public to attend except where exempt or confidential matters are to be discussed.

Various Committees are set up to enable closer scrutiny in specific areas, including an Environment Overview and Scrutiny Committee (OSC), Growth OSC, Culture OSC, Rural OSC and Communities OSC. The Council also has a Joint OSC which can be called to discuss issues relevant to all OSC – like the budget, corporate strategy etc. The Employment committee and Constitution Committee are committees of the Council as is Development Management which is a regulatory committee.

1.2 Conclusion This review has confirmed that South Kesteven District Council has in place adequate controls surrounding Corporate Governance and that these controls are sufficiently complied with. However, two weaknesses were identified relating to: the publishing of data as required by the Transparency Code 2015 and the updating of the Constitution with the amendments agreed by the Constitution Committee and approved by the Council.

Internal audit opinion: Taking account of the issues identified, the Council can take substantial assurance that the controls upon which the organisation relies to manage the identified risk(s) are suitably designed, consistently applied and operating effectively.


• The Constitution sets out how the Council operates, how decisions are made and the procedures which are followed to ensure that these are efficient, transparent and accountable to local people. The Constitution includes Contract Procedure Rules, Financial Procedure Rules and Scheme of Delegation.

• The Council has in place a Constitution Committee which deals with amendments to the Council’s Constitution. It considers any proposed changes and makes recommendations to the Full Council. Constitution Committee meetings are open to the public, however in exceptional circumstances, members of the public might be excluded from these meetings to allow the consideration of exempt information.

• The Constitution is published on the Council's website to provide guidance and transparency to its councillors, staff and members of the public on how the Council conducts its affairs.

CORPORATE GOVERNANCE - EXECUTIVE SUMMARY

Page 30 of 34


• A Scheme of Delegation is included in the Constitution to outline the roles and responsibilities of Committees and operational departments, and uses job titles rather than individuals' names to ensure that it remains current in the event of staff changes.

• The Terms of Reference (ToR) detail the roles and responsibilities of each Committee. The Committee structure and membership details are published on the Council's website.

• A Schedule of Decisions is published on the Council's website and sets out the key decisions which the Cabinet expects to make over the next four months. The Schedule of Decisions states the frequency of Council and Cabinet meetings and specifies the decision makers for each key decision along with their contact details should any member of the public wish to have an input.

• A quorum is defined within the Constitution to specify the minimum attendance required for each Committee meeting.

However, testing identified the following weakness and as a result we have agree one ‘medium’ and one ‘low’ priority management actions:

• The Constitution on the Council’s website was last updated in September 2017 and does not reflect the changes agreed by the Constitution Committee in December 2017.

• Testing identified that the Council is not adequately complying with the Transparency Code 2015 under which the Government requires local authorities to publish certain data sets to make them available to public scrutiny. Such data sets include details of purchases over £500, social housing assets and senior salaries. Testing of a sample of 12 data sets identified that only six were published on the Council's website as required. There is non-compliance with Government Policy.


* Shows the number of controls not adequately designed or not complied with. The number in brackets represents the total number of controls reviewed in this area.


Non-Compliance

with controls*

Agreed management actionsLow Medium High

The Council’s governance arrangements do not enable informed decision making. 0 (8) 1 (8) 1 0 0

Non-compliance with regulatory requirements. 0 (1) 1 (1) 0 1 0

Total

1 1 0

Page 31 of 34


2 DETAILED FINDINGS Categorisation of internal audit findings Priority Definition








Responsible owner

Risk: The Council’s governance arrangements do not enable informed decision making.

1 The Council’s Constitution Committee advises and proposes to the Council amendments to the Constitution. The Constitution Committee is made up of five members. The Committee deals with amendments to the Council’s Constitution and considers any proposed changes and makes recommendations to the Full Council.

Yes No A review of the Committee papers and minutes of meetings for the Constitution Committee established that:

a) Seven meetings were planned, and five meetings had been held during the period March 2017 to March 2018.

b) Following the review of the proposal/amendments by four Committee meetings and following reporting to the Council, the Constitution was updated. However, we noted that the Constitution had not yet been updated with the amendments agreed at the December 2017 meeting.

Low The Constitution will be updated to reflect the changes approved by the Constitution Committee in December 2017.

29 April 2018 Assistant Director Legal and Democratic

Page 32 of 34





Responsible owner

Risk: Non-compliance with regulatory requirements.

2 The Council publishes all data that it is required to in line with the Transparency Code 2015. The relevant departments are responsible for collating and publishing the information on the Council's website. The Constitutional Department monitor the Council's website to ensure that the data is published onto the Council's website as required.

Yes No For a sample of 12 data sets testing established that:

a) For Expenditure exceeding £500 the Council publishes information on expenditure exceeding £250 instead of exceeding £500 and also publishes the data on a monthly basis rather than a quarterly basis.

b) For six data sets (Local Authority Land, Social Housing Asset Value, Grants to Voluntary, Community and Social Enterprise Organisations, Organisation Chart, Constitution and Trade Union Facility Time) the Council had published the information as required by the Transparency Code 2015.

c) For the parking account, a review of the Council’s website established that the Council publishes the parking account on their website annually and a review of the 2016/17 account established that the account includes the income (penalty charge notices (PCNs), season tickets, pay and display, other income and residents parking. The parking expenditure incurred during the year was £629K for off-street parking. The Council made a surplus of £623k.

It was noted that the breakdown of how the Council has spent the surplus on the parking account is not

Medium a) The Council will publish expenditure exceeding £500 but will continue to publish monthly which is beyond the minimum requirements.

c) A breakdown of how the Council has spent the surplus on its parking account will be published on the Council’s website.

d) The Council will publish the number of marked out controlled on and off-street parking spaces within their area, or an estimate of the number of spaces where controlled parking space is not marked out in individual parking bays or spaces on its website.

e) The Council will publish information on Fraud and details of invitation to tender for contracts to provide goods and/or services with a value that exceeds £5,000.

30 June 2018 Management Accountant

Service Manager Venues & Town Centre Management

Service Manager Venues & Town Centre Management

Counter Fraud Officer

Procurement Lead

Page 33 of 34





Responsible owner

published information as required by the Transparency Code 2015.

d) For parking spaces, the Council provides the details of the car parks situated in District for use by shoppers, visitors and residents, however the number of spaces at each car park in not documented on the website page as required by the Transparency Code 2015.

e) On review of the Council’s website we noted that information required to be published on Fraud and details of invitation to tender for contracts to provide goods and/or services with a value that exceeds £5,000 is not published by the Council on its website.

Page 34 of 34

Documents

SOUTH KESTEVEN DISTRICT COUNCILmoderngov.southkesteven.gov.uk/documents/s20630/Internal Audit … · Right to Buy Final 0 3 1 Corporate Governance Final 0 1 1 Page 4 of 34. South